An extremely volatile week ended for stocks with mixed results.  While the Dow 30 Industrials managed a small gain, all other major indexes were down with the Russell 2000 small cap index down the most.

While stocks rose on Monday, on Tuesday the FED made an “emergency” 0.5% cut to short term rates to counteract any slowdown due to Covid-19.  However, given that this was an “emergency” cut (not at a normal FED meeting) and that Chairman Powell indicated that the FED’s tools are inadequate to address the virus, stocks sold off.

On Wednesday, stocks rose following Joe Biden’s Super Tuesday surge to the lead in the delegate count over socialist Bernie Sanders.

Stocks fell again on Thursday and Friday with oil stocks getting clobbered after OPEC+ could not reach an agreement for a temporary production cut of 1.5mm barrels per day.  Saudi Arabia and the other OPEC countries agreed to cut 1MM barrels per day only if a group of 10 non-OPEC countries led by Russia agreed to 0.5MM barrels per day of cuts.  Russia refused to participate in the cut, so there were no cuts.  With the deal falling through, crude oil prices fell over 10% on Friday.

Mortgage rates are now at record lows with 30 year fixed at 3.29% and 15 year fixed at 2.79%.

Despite the market’s concerns looking forward, in the rear view mirror, the economic number were mostly good.  While February’s purchasing manager indexes slowed some in February, the month saw a robust increase in employment. 

Medium and long term treasuries continued to fall to record lows this week as the 30-year Treasury ended at 1.312% and the 10-year Treasury yield ended at  0.75%.  Crude oil plunged to $41.52 a barrel and natural gas rose to $1.72 MMBTUs.  The U.S. dollar fell against a basket of currencies and gold prices rose to $1674.30 an ounce.

In economic numbers this week:

• The private China Caixin Markit reported
  • Manufacturing PMI fell from 51.1 in January to 40.3 in February representing a severe contraction.  China’s manufacturing contracted sharply in February due to factory shutdowns to control the spread of Covid-19.  40.3 is the lowest number for China since the survey started in 2004.
  • Services fell sharply from 51.8 in January to 26.5 in February, although the backlog of work increased.
• Japan’s au Jibun Bank Manufacturing PMI fell from 48.8 in January to 47.8 in February.  The contraction was attributed to Covid-19.
• IHS Markit reported:
  • U.S. Manufacturing PMI fell from 51.9 in January to 50.7 in February.  Still expanding but at a slower rate.
  • U.S. Services PMI fell from 53.4 to 49.4.  Services fell into contraction as people traveled less.
  • Eurozone composite PMI rose from 51.3 in January to 51.6 in February. 
• The Commerce Department reported the U.S. trade gap shrank 6.7% in January from the prior month.  Imports of industrial supplies, capital goods and autos all fell.
• The Labor Department Reported:
  • First time jobless claims in the prior week fell 3,000 to a seasonally adjusted 216,000.  The four week moving average of claims rose 3,250 to 213,000.
  • The U.S. created a robust 273,000 jobs in February
  • The unemployment rate fell to 3.5%.
  • Wages have increased 3.0% from a year earlier.
• The EIA weekly oil report is attached.  Also, the EIA reported in the past week:
  • Field production of crude oil rose from 13.0MM barrels per day to 13.1MM bpd.
  • Natural gas storage fell by 109BN cubic feet and is above the five year average at this time of year.
• Baker Hughes reported the number of active oil rigs rose 4 to 682 and the number of active gas rigs fell 1 to 109.
• Factset reported with 98% of S&P 500 companies reporting Q4 earnings, the average earnings increase was up 0.9% from a year earlier.   While 2019 earnings have risen slightly, forecasts for Q1 2020 are now for a 0.1% decline.

Please call us if you have any questions or concerns.

Best Regards,

Loren C. Rex, CFP^®, AIF^®, MA                                              Erik A Smith AIF^®

President                                                                                   Managing Partner

Generations Financial Planning & Wealth Management              269-441-4143

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Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated. 

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.